OECD joins criticism of rating agencies

MILAN, July 7, 2011 (AFP) - The Organisation for Economic Cooperation and Development accused ratings agencies on Thursday of aggravating the eurozone debt crisis by creating "self-realising prophesies."

OECD chief economist Pier Carlo Padoan said in an interview with Italy's Stampa newspaper: "Lately, rating agencies have proved that they are strongly 'pro-cyclical' and produce self-realising prophesies"

Padoan said the agencies did not merely pass on information but "express judgements, speeding up trends already at work."

He said: "It's like pushing someone who is on the edge of a cliff. It aggravates the crisis."

Rating agencies came under strong attack from senior personalities in the European Union on Wednesday after Moody's downgraded Portugal's rating to "junk" status, casting new doubts on the markets over EU efforts to manage the eurozone debt crisis.

Moody's said that Portugal may need a second round of bailout funds before it can return to capital markets.

Portuguese bank shares fell and the yield on 10-year government bonds climbed from 12.185 to 12.719 percent.

Asked about the possibility of a second aid package for Portugal, Padoan said it was "too soon to say."

He said: "Countries need time for stabilising plans to take effect, for economies to start to grow."

He also said that "the euro is not in danger" and that "the crisis will resolve itself through a strengthening of European institutions."

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